Manatt on Health Reform: Weekly Highlights - March 2016 #2

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The IRS releases guidance on resolving Form 1095 conflicts; New Hampshire's Medicaid expansion renewal clears a hurdle in the State; and New York providers get $1.5 billion in long-awaited DSRIP capital and infrastructure funding.

MEDICAID EXPANSION & REFORM ACTIVITY:

Arkansas: Medicaid Expansion Worth up to $757 Million

Up to $757 million over the next five years hangs in the balance if Arkansas opts not to renew its Medicaid expansion, according to an updated estimate prepared by The Stephens Group for Arkansas's Health Reform Legislative Task Force. This estimate, an increase over projections released in August 2015, is said to be a result of lower-than-expected program costs and a greater number of traditional Medicaid beneficiaries transferring to the expansion group (which has a higher federal matching rate and thus results in lower state spending). The Legislature is expected to consider Governor Asa Hutchinson's (R) Medicaid expansion plan, called Arkansas Works, during a special legislative session in early April. Governor Hutchinson said failure to approve Arkansas Works would lead to additional cuts to the State budget. The plan will require three-fourths majority support in the House and Senate and CMS approval.

Colorado: Medicaid Expansion Positively Impacted Economy, Trend Expected to Continue

Since Medicaid expansion was implemented, Colorado has added 31,000 jobs, raised annual household earnings by nearly $650, and added $3.8 billion to the State economy, according to a new report commissioned by the Colorado Health Foundation and prepared by the Futures Center at Colorado State University. The report projects that by fiscal year 2034-2035, Medicaid expansion will have added approximately 43,000 new jobs to the State, raised average annual household earnings by $1,033, and added a total $8.5 billion to the State economy, which will increase General Fund revenue from $102.4 million to $248.3 million. The General Fund is not expected to incur any additional expenses due to expansion.

Indiana: Legislature Votes to Establish Authority Over Medicaid Expansion

The State House and Senate passed a bill that would require legislative approval to make modifications to the State's Medicaid expansion program, Healthy Indiana Plan 2.0, which is authorized through a demonstration that will require renegotiation prior to its expiration in 2018. According to supporters, the bill is designed to strengthen the State's position for renegotiating the terms of the waiver with the federal government. Governor Mike Pence (R), who is up for re-election this year and is expected to sign the bill into law, said he wants to ensure the State "has a solid legal framework" for the program before entering into those negotiations, especially considering uncertainty regarding the federal administration after the election.

New Hampshire: House Approves Medicaid Expansion Renewal With Modifications

New Hampshire's House voted to renew the State's Medicaid expansion program through 2018, with several new requirements, including that enrollees be employed or in pursuit of work and pay co-pays for non-emergency visits to the emergency room. The bill, however, includes a severability provision that would permit renewal of the program even if CMS does not approve some of the new requirements, including work status. The bill funds the expansion through three sources of funding: the insurance premium tax on health plans that serve expansion enrollees, voluntary donations from acute care hospitals and transfers from the State's high risk pool. The program would be repealed in the event that these funding sources were not sufficient to cover the State's share of the costs. The bill now heads to the Senate, where reauthorization is expected.

New York: $1.5 Billion Distributed to DSRIP Providers for Capital and Infrastructure Support

Governor Andrew Cuomo (D) announced $1.5 billion in grant funding through the Capital Restructuring Financing Program and Essential Health Care Provider Support Program, which supports implementation of the State's Delivery System Reform Incentive Payment Program (DSRIP). Grants will sponsor infrastructure improvements, IT system development, debt relief at hospitals and clinics, and projects ineligible for funding through the State's $7 billion DSRIP initiative but which are considered vital to the program's success. The long-awaited capital funding, originally earmarked in the State's 2014-2015 budget, will fund 162 projects at hospitals and clinics throughout the State.

Utah: Senate Sends Limited Medicaid Coverage Plan to the Governor

After years of legislative battle, the Utah Senate approved a very limited extension of Medicaid coverage to approximately 16,000 Utahns, which is significantly fewer than the 125,000 that would have been covered under several failed Medicaid expansion plans. The plan predominantly targets Utahns living in extreme poverty, including the chronically homeless and those involved in the criminal justice system, guaranteeing coverage for at least 12 months. The State will spend $30 million on the program, 45% of which will be provided by hospitals, and will draw down $70 million in federal funds, with a significantly lower federal matching rate than would have been provided through traditional expansion. Democratic lawmakers who had supported the ACA's Medicaid expansion expressed frustration with the plan, saying that while it helps Utah's most needy, it is fiscally unwise and leaves thousands of low-income Utahns without coverage. The bill now goes to Governor Gary Herbert (R) who is expected to sign it, after which the State will begin the process of seeking a federal waiver.

FEDERAL AND STATE HEALTH REFORM NEWS:

IRS Releases Information for Tax Preparers to Resolve Apparent 1095 Conflicts

The IRS released a best practices guide that describes how tax preparers could resolve seemingly conflicting information across 1095 forms, in particular when it appears an individual may have had duplicate coverage in the same calendar month, such as Marketplace coverage with a premium tax credit and Medicaid. The guide instructs preparers to gather necessary information to determine if their client was eligible for premium tax credits, and it provides examples of circumstances under which overlapping coverage would be permissible, including when an individual changes their source of coverage in the middle of a month or is retroactively determined eligible for Medicaid. The IRS recommends that tax preparers urge these dually-enrolled individuals to contact the Marketplace to resolve any discrepancy.

CMS Releases Proposed Rule Reforming Reimbursement Method for Medicare Prescription Drugs

CMS has proposed to test fundamental changes to the way Medicare Part B drugs are paid under the Medicare physician fee schedule and outpatient prospective payment system. Under the first phase of the proposed model, beginning on or after August 1, 2016, CMS will pay approximately 50% of physicians and hospital outpatient departments for Part B drugs using a new formula: the average sales price (ASP) plus 2.5% of the ASP plus a flat rate of $16.80. The remaining providers will continue to receive payments based on the current methodology of ASP plus 6% of ASP. During the second phase of the model, beginning as early as January 1, 2017, CMS will continue both aforementioned formulas and test adding value-based payments for some drugs to each of the formulas (creating four methodologies total). CMS plans to assign approximately 1,700 primary care service areas to each of the four methodologies in phase two. CMS suggests including one or more of the following value-based pricing tools as part of the model: reference pricing, pricing based on safety and cost-effectiveness for different indicators, outcomes-based risk-sharing arrangements, discounting or elimination of patient coinsurance amounts, and clinical decision support tools for appropriate drug use and safe prescribing.

8.8 Million Consumers Effectuated Marketplace Coverage by End of 2015

CMS's recently released data indicates that 8.8 million consumers effectuated Marketplace coverage by paying their premiums as of December 31, 2015. Nearly three-quarters of these enrollees (6.3 million) receive coverage through HealthCare.gov while the remaining are enrolled through State-based Marketplaces. Approximately 84% of Marketplace enrollees receive advance premium tax credits, which average $272 per month. The number of effectuated enrollments is point-in-time and does not account for enrollments in the final month of open enrollment.

California: State Secures $1.4 Billion Through New Health Plan Tax

After a year of deliberation, the State Legislature approved a packages of taxes, including one that will newly apply to all of the State's commercial health plans and will secure $1.4 billion in federal funds. The State's health plan tax was previously only levied against plans that serve Medicaid enrollees, which the Obama administration declared non-compliant with federal law. The replacement bill will give health plans that do not serve Medicaid enrollees around $371 million in corporate and insurance tax breaks, including a tax on premiums, and will save the industry as a whole $100 million.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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